National Australia Bank (NAB), the No. 4 lender by market value, on Monday reported a 1 percent fall in first quarter unaudited cash profit as costs grew faster than revenue. NAB posted unaudited cash earnings of A$1.6 billion ($1.23 billion) for the quarter ended Dec. 31, down 1 percent from the same period a year earlier. The bank said costs rose by 5 percent in part due to annual salary increases and higher redundancy costs, while revenue rose by 1 percent.
The ratio of 90-days past due and total impaired assets to gross loans rose to 0.90 percent at end-December from 0.85 percent at end-September 2016. NAB did not give a reason for the increase. It said its net interest margin was “broadly stable”. “While the Australian and New Zealand economies remain resilient and continue to deliver solid growth, the operating environment has some challenges with funding costs remaining elevated and competition still intense,” NAB Chief Executive Andrew Thorburn said in a statement.
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The bank said its Tier 1 capital ratio had fallen to 9.5 percent at Dec. 31 from 9.2 percent at Sept. 30 after it paid a final dividend. The bank said it was considering the issue of a Tier 2 capital security to shore up its capital position, subject to market conditions. Australian bank returns have been under pressure from higher wholesale funding and deposit costs, as well as regulatory changes requiring them to hold more capital against their mortgage books to provide a more level playing field for smaller banks. The bank is the first of Australia’s “Big Four” lenders to report results for the quarter ended Dec. 31.